McCain’s Campaign Against Protectionism Draws Ire Of Industry

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Peter Fricke Contributor
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The shipbuilding industry is launching a counteroffensive against Republican Sen. John McCain’s effort to repeal a protectionist law that artificially raises domestic shipping costs.

McCain filed an amendment to the Keystone XL bill last week that would repeal the Merchant Marine Act of 1920, also known as the Jones Act, which “requires that all goods shipped between waterborne ports of the United States be carried by vessels built in the United States and owned and operated by Americans.”

In a press release, McCain called the Jones Act “an antiquated law that has for too long hindered free trade, made U.S. industry less competitive, and raised prices for American consumers.” (RELATED: McCain Wants to End Protectionism for Shipping Industry)

The Congressional Research Service, he noted, has determined that “it costs $6 per barrel to move crude from the Gulf Coast to the Northeast United States on a Jones Act tanker, while a foreign-flag tanker can take that same crude to a refinery in Canada for $2 per barrel.”

In response, Politico reports that “shipbuilding advocates are launching an assault [on McCain’s effort],” lobbying elected officials and warning that repeal of the Jones Act would put thousands of U.S. jobs at risk as well as threaten national security.

The International Association of Machinists and Aerospace Workers issued a letter saying that, “McCain’s amendment would result in the outsourcing of U.S. shipbuilding to foreign nations,” which Coast Guard Commandant Adm. Paul Zukunft told Politico would “put our entire U.S. fleet in jeopardy.”

McCain, who has long been one of the Senate’s leading national security advocates, disagrees with that assessment, arguing that the Jones Act has no value for national defense, and merely forces consumers to subsidize inefficient companies. (RELATED: The Freer the Trade, the Better Things Get)

The Maritime Executive, a trade publication, ran an op-ed on Sunday by Editor-in-chief Tony Munoz claiming that McCain’s “attack” on the Jones Act “would put hundreds of thousands of Americans out of work in more than half the states” if it succeeds.

Munoz admits that, “Lifting the Jones Act would open U.S. markets to foreign competition and might decrease prices for consumers,” but counters that, “McCain’s laissez-faire sentiments would actually destroy U.S. jobs, lower personal income, devastate U.S. vessel-operating companies, and obliterate American shipbuilders.”

Bryan Riley and Brian Slattery, however, contend in an op-ed for The Daily Signal that, “protecting U.S. industries from competition may actually have the opposite effect.” (RELATED: Protectionism is the Solution to America’s Job Shortage)

U.S. exports of commercial ships were virtually negligible in 2013 ($0.1 billion), they say, whereas exports of trucks and trailers (which have no Jones Act-like protections) amounted to $4.1 billion.

Moreover, “commercial shipbuilding accounts for just 21.7 percent of total shipbuilding,” and the vast majority of the industry produces vessels for the military, so repealing the Jones Act would affect far fewer jobs than the industry predicts. (RELATED: How to End the Jones Act’s Protectionism)

Whatever limited economic damage might result would be more than offset by the gains to consumers, particularly those in Hawaii and Puerto Rico that depend on waterborne imports from the mainland.

On balance, they conclude, repealing the Jones Act “would promote competition, strengthen the economy, and benefit American consumers.”

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